OP-ED | Lessons from Canada’s IPED absence

CALGARY—Last month in San Francisco, in the margins of the annual meeting of the Asian Pacific Economic Cooperation leaders’ summit, some significant things happened, including a critical meeting between U.S. President Joe Biden and China’s President Xi Jinping. Improved relations between Canada’s two largest export markets is good news.

More significant is what both did and did not happen: the United States concluded parts of the Biden Administration’s cornerstone trade initiative with Asia—the Indo-Pacific Economic Framework (IPEF)—without Canada. There is a lot of handwringing in this country about our exclusion. While much—but not all—of it is misplaced, understanding what happened, and what it means for Canada and especially the four provinces responsible for two-thirds of Canada’s exports to the Indo Pacific, is important.

The first key point is that the U.S. did not sign a new trade agreement with Asia. The IPEF is a workaround to not being able to get traditional trade agreements with things like tariff cuts through Congress.

If a traditional trade agreement were a steak dinner, the IPEF is the sides without the meat.

The Americans are, unsurprisingly, hyping this as an improvement. Instead of worrying about what we missed, we should be taking advantage of what we have that the Americans continue to lack which is a real trade agreement with Asia in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

A related point is that in the IPEF, the U.S. has not even been able to put together a full course of side dishes. Only one agreement—on supply chains—under the IPEF framework of agreements was signed in San Francisco. Negotiations were concluded on a clean economy agreement, on establishing a permanent body to oversee the agreement, which would also consider applications to join IPEF, and an anti-corruption ‘Fair Economy’ agreement. On trade, work on a digital trade agreement was thwarted by the United States following a call from 13 Democrat Senators. Other Democrats in the U.S. Senate are calling for discussions on any trade topic to be abandoned entirely. So, the IPEF’s limited success shrinks the list of potential Canadian worries.

The Biden administration pushed hard, but failed to have negotiations concluded and ready for signing with maximum domestic press coverage in San Francisco. With the full-scale election season about to kick off south of the border, it is extremely unlikely that the current U.S. administration will be able to complete negotiations. What is clear is that according to Donald Trump, his administration would rescind anything a Biden administration negotiates on day one back in office. Since IPEF agreements are not approved by Congress, cancelling them can be done easily. So, while there is apparently little for Canadian business to worry about now with IPEF, there may be even less a year from now.

The lesson here for Canadian business and governments is to worry less about not being in the IPEF, and to worry more about the upcoming North American trade agreement review and potential renegotiation. If the Biden administration could not get an agreement done that does not have to be signed by congress (because there are no tariff cuts), and Trump is promising to kill even a non-trade deal, then keeping our current North American trade agreement may be more difficult than we think. There is also a bird-in-the-hand lesson of needing to pay more attention, and devote more resources to the CPTPP than chasing American desperation.

A final lesson is one reason Canada is not part of IPEF: it brings headaches—not help—for the Americans in Asia. The IPEF produces economic benefits that the U.S. does not need to share with an economic competitor like Canada, and we are not much of a security ally. Our reputation in Asia of showing up to lecture trade partners and of almost killing the CPTPP agreement by demanding at the last minute that it be renamed makes us a liability—not an asset—in Asia. The Americans, and their Asian collaborators, see no value in Canada’s approach. In fact, the Americans managed to make needed progressive gains, including a First Nations provision in the IPEF supply chain agreement, without Canada and our lecturing approach.

The lesson here, as Canada as it takes over as chair of the CPTPP Commission in 2024, is that there are better ways to advance our trade and progressive objectives in Asia.

Carlo Dade is director of the trade and trade infrastructure centre at the Canada West Foundation.

Further reading from CWF:

Backgrounders
What do businesses in Alberta need from an Indo-Pacific strategy?
What do businesses in Saskatchewan need from an Indo-Pacific strategy?
What do businesses in Manitoba need from an Indo-Pacific strategy?